Question:
Price and efficiency variances. Peterson Foods manufactures pumpkin scones. For January 2009, it budgeted to purchase and use 15000 pounds of pumpkin at $0.89 a pound. Actual purchases and usage for January 2009 were 16.000 pounds at $0.82 a pound. It budgets for 60.000 pumpkin scones. Actual output was 60,800 pumpkin scones.
1. Compute the flexible-budget variance.
2. Compute the price and efficiency variances.
3. Comment on the above results and provide a possible explanation for them.